How to Navigate the Ins and Outs of Inherited IRAs

An inherited IRA is a type of retirement account opened in a beneficiary's name after the original account owner passes away. Vitalii Vodolazskyi/Shutterstock

If someone left behind tax-advantaged retirement funds for you, there are some points you need to carefully examine in order to make the most of your inherited individual retirement account (IRA).

What Is an Inherited IRA?

An inherited IRA is a type of retirement account opened in a beneficiary’s name after the original account owner passes away. Here are some quick facts about inherited IRAs:

• Additional contributions can’t be made into inherited IRAs.
• Most non-spousal beneficiaries must empty the account within 10 years, as a result of the Secure Act of 2019 and the Secure 2.0 Act.
• Inherited IRAs must be the same account type (e.g., traditional or Roth) as the original account.

But depending on factors like your age and relationship to the deceased, there are various rules that dictate how IRAs work. These beneficiary rules impact taxes and required minimum distributions (RMDs) or the amount of money you must withdraw from your retirement plan after reaching age 73.

To understand how inherited IRAs work, it’s best to start by looking at your relationship to the original account owner.

Inherited IRAs for Spouses

If you’re the spouse of the original retirement account holder, you generally have the most options when it comes to inherited IRAs.